Steve Edney is Vice President of Sales for TriNet, where he focuses on helping financial services firms navigate the complexities of human resources administration.
Second of a two-part series on ACA and the finance industry
In Part I of our ACA series, we discussed the significant impact that firms with 51-100 full-time employees will experience when they are migrated to the “small group” market for healthcare benefits as of their first renewal on or after January 1, 2016. This is a change for midsize businesses that were previously considered part of the “large group” benefits market. This change from “large group” to “small group” is likely to result in a reduction of overall benefits, reduced access to rich benefit plans and potentially significant premium increases.
Now we turn our attention to another area of impact for midsize firms: reimbursement rates for out-of-network medical care.
ACA and changing medical reimbursement rates
There are two common ways that businesses get reimbursed for out-of-network medical expenses and which one a company uses depends on their company size.
- The Medicare physician fee schedule: This plan is most common in the small group market. In this reimbursement plan, a percentage of the Medicare reimbursement rate is used to cover the extra costs associated with utilizing out-of-network medical care.
- Usual, customary & reasonable charges (UCR): The UCR method is, simply put, the fair market value that health care providers set. It is the maximum amount your benefits provider will reimburse you for. The UCR is calculated by the going rate for the health care you are receiving in the zip code in which the procedure is performed.
For example, if you undergo a knee replacement surgery by an out-of-network surgeon in zip code 10022, your healthcare plan provider will look at what you are paying the doctor and then look at the average cost for such procedures in that specific zip code.
Healthcare plans employing the UCR method provide employees with a much higher reimbursement rate when they use out-of-network providers. Because this type of reimbursement approach is usually only open to “large group” firms, employees at midsize firms that are being reclassified into the small group may no longer be able to afford their current out-of-network healthcare providers.
National v. local cost comparisons
The Medicare reimbursement method is based on healthcare costs on a national average, while the UCR method looks at what the average doctor in your zip code charges. Because the reimbursement rate with UCR is closer to the amount you actually pay, the result with UCR is lower out-of-pocket expenses. Of course, the Medicare reimbursement approach of looking at national averages has an adverse impact in areas such as New York, which have a much higher cost of healthcare than the national average.
Most small group plans pay somewhere between 110% or 140% of the Medicare reimbursement level for their out-of-network benefits. Some carriers in the small group market do offer an option to purchase a plan using UCR to pay out-of-network claims, however, these UCR-based plans are priced significantly higher than those offering Medicare level reimbursement.
Almost every medical benefits plan currently available in the New York small group market uses the Medicare physician fee schedule to pay out-of-network claims, costing your employees a significant amount of money over the large group UCR rate they will now be subject to.
Preserving your access to “large group” benefits
If you are a New York firm with 51-100 employees, you will be negatively impacted by the changing landscape of ACA. However, there are ways you can still preserve your “large group” benefits without breaking your budget. To learn more about your options, or if you have any questions on how ACA changes will impact your firm, contact me at email@example.com or 203-388-0932.